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Independent contractor clarity

Apr 07, 2014 | | Comments (3)

Dear Liz: I was taken aback by your answer to the receptionist whose employer was paying her as an independent contractor although she should have been paid as a W-2 employee. I believe your response was to lie on her tax returns and hide the fact that her employer was doing something illegal. I cannot say in how many ways that is wrong. As a human resources professional, I would advise this person to contact regulators under her state’s whistle-blower protections and let them know what has happened and take the advice that they give. If the writer has been given a 1099, you can be assured that others in the company have too. Her name remains anonymous. Even if her employer finds out it was her, she has recourse if she’s fired. I’ve always enjoyed your column and look forward to reading it each Sunday, but this response was totally off the charts.

Answer: Actually, the advice was exactly the opposite. Tax pro Eva Rosenberg recommended telling the truth by filing new forms, which would alert the IRS to the employer’s deception. Rosenberg said that it probably would take the tax agency a couple of years to get around to auditing the employer, which would give the receptionist time to find a new job.

Also, not all states have laws protecting whistle-blowers, and some of those that do apply only to public employees. No one should assume she is protected by such a law without during further research.

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Categories : Q&A, Taxes

3 Comments

1

If more companies were audited, I think you would find that this goes on alot.

2

This has been going on for a long time, many years in fact. I recall a friend working for a major corporation in the late 70s who was classified as an “independent contractor.” She had a desk, a phone, worked 9-5 and had regular clerical duties to perform. She was not the only person this company was paying this way, and it was a clear attempt (successful, it seems) not to pay benefits to those employees.

3

Two companies that I’ve worked for, the LA Times and Microsoft, both got their hands slapped for this in the 1990s. Microsoft wound up paying close to $100 million. It’s amazing that employers still think they can do this since all an employee has to do is file the right tax form & they’re busted.